Everyone makes mistakes - it's just that some are more costly than others. And for first-time landlords, the learning curve can be steep and there can be some painful lessons along the way.
But although being a landlord isn't easy and experience counts for a lot, there are many things that first-timers can do to minimise the potential for mistakes. A good starting point is being aware of the most common mistakes and how you can avoid them - and you'll be well on your way to reaping the benefits of savvy property investment.
Treating an investment property as a hobby
One of the biggest mistakes that first-time landlords make is not treating their investment property as a business. It's not a hobby - it's a substantial asset which involves significant time and effort and which needs prudent and ongoing financial management.
Avoid this by drawing up a comprehensive business plan, getting expert advice and building a team who can help you make informed decisions.
Underestimating the cost of maintenance and repairs
Inexperienced landlords often wrongly estimate just how much money is required for repairs, maintenance, cleaning and upgrades. In order for a property to attract quality tenants and hold its value, ongoing investment is required and landlords should budget accordingly.
A wise strategy is to set aside a portion of the monthly rental income and to build up a sufficient buffer to cover any maintenance costs - including those unexpected mishaps like a burst hot water tank or leaking swimming pool.
Poor tenant selection
Most first-time landlords don't have the skills, the tools or often the time, to find the right tenant and they don't realise just how costly a wrong decision can be. They often rush their decisions and rely on 'gut-feel' and a hand-shake rather than tried-and-tested screening processes and legally binding documentation.
The way to go is to take time to check the prospective tenant's credentials, verify references and conduct personal interviews to make sure you've ticked all the boxes - and don't forget the signed rental contract.
Forming a relationship with the tenant and not enforcing the lease terms
Smart property investors will have good relationships with their tenants based on trust, goodwill and transparency, but many inexperienced landlords fall into the trap of becoming too friendly with tenants and consequently they don't always make the best business decision. They often ignore the formalities and don't enforce the lease terms, they feel bad about increasing the rent amount, they tolerate late or partial rent payments and they overlook breaches of the contract (such as damage to the property or neighbours' complaints).
One of the best ways of keeping tenants at arms' length is to employ a property manager. They will handle all aspects of the property in a professional manner, making sure that your investment delivers the best possible returns.
Setting the wrong rent
It's easy for first-time investors to fall into the trap of setting the wrong rent - and it can be very difficult to escalate rents that have been set too low. It's also difficult to rent a property where the rate is too high and vacancies are costly, as are high turnover rates.
Knowing what rent to charge is a science and should be based on thorough market research and an understanding of current market conditions. Experienced professionals such as those employed by the leaders in property management in Perth, Time Conti Sheffield, are able to use their decades of experience to set appropriate market-related rents and present the property to the widest possible pool of quality prospective tenants. If you're a first-time investor and want to avoid making mistakes, you should talk to the Perth property management experts on 08 9362 5333 or visit their website, www.timeconti.com.au and use their skills and experience to your advantage.